Oct. 5 (Bloomberg) -- Venezuelans voting whether to re-elect Hugo Chavez on Oct. 7 will also decide the fate of a
regime that forms the linchpin of an alliance from Iran to Cuba
against U.S. policies.

Chavez has tapped the world’s largest oil reserves to
provide about $7 billion annually in subsidized crude to Cuba
and its Caribbean neighbors, more than three times what the U.S.
spends in aid in the Western Hemisphere. He ended anti-drug
cooperation with the U.S. in 2005 and signed more than 100
accords with Iran even as President Mahmoud Ahmadinejad’s
government faces growing isolation over its nuclear program.

In the 58-year-old president’s tightest election yet,
challenger Henrique Capriles Radonski has blasted his rival for
“exporting revolution” while failing to address a surge in
crime and 18 percent inflation. Without Chavez, countries such
as Nicaragua and Bolivia would lose their “standard bearer,”
said Cynthia Arnson, Latin America program director at the
Woodrow Wilson Center for International Scholars in Washington.

“A Capriles victory would dramatically alter Venezuela’s
alliances,” Arnson said in an Oct. 1 interview. The loss of
Chavez “could further isolate the small number of countries
that have considered themselves part of that alternative
political vision. Cuba would be a big loser.”

Venezuela receives thousands of Cuban doctors, nurses and
sports trainers in exchange for a daily supply of 100,000
barrels of oil that undermines the U.S. embargo against the 53-year-old government of Raul and Fidel Castro. Chavez bonded with
Fidel after the Cuban revolutionary supported him during a
failed 2002 coup. He has traveled to the Caribbean island to
undergo surgery for cancer three times since June last year.

‘Viva Fidel!’

At a campaign event Oct. 2, Chavez said he’d received a
letter of support from Castro.

Officials at Venezuela’s Information Ministry didn’t
respond to messages left by Bloomberg.

As U.S. and European sanctions aimed at curbing Iran’s
nuclear program send the rial plunging and sow unrest, Chavez
has remained a steadfast ally, saying that maintaining ties with
the Islamic Republic is a “holy matter.” He’s visited Iran
nine times during his almost 14 years in power and secured
agreements to help build car and tractor plants in Venezuela.

The U.S. last year imposed sanctions on Petroleos de
Venezuela SA, the state oil company, for working with Iran’s
energy industry. According to the State Department, it sent two
cargoes of gasoline additives worth $50 million to Iran from
December 2010 to March 2011.

Assault Rifles

After the U.S. imposed an arms embargo on Venezuela in
2006, Chavez tapped $4 billion in financing from Russia to buy
military equipment. Chavez said in June that Venezuela would
produce 25,000 assault rifles a year in addition to ammunition,
grenades and bulletproof vests with help from the U.S.’s former
Cold War foe.

In Nicaragua, Venezuela’s oil and aid program totaled $609
million last year, or almost 10 percent of gross domestic
product, according to the Central American country’s central
bank. That helped finance agricultural cooperatives and paid
bonuses to 150,000 government workers, the bank said in a March
report.

U.S. aid to Latin America and the Caribbean totals about
$1.9 billion annually, including counter-narcotics programs for
Central America, disaster assistance in Paraguay and education
projects in Jamaica, according to the Congressional Research
Service.

Anti-U.S. Rally

When Argentina was blocked from international credit
markets in the wake of its 2001 default on $95 billion of bonds,
Chavez stepped in to buy more than $5 billion in debt, helping
then-President Nestor Kirchner snub investors such as New York-based hedge fund Elliott Associates LP. Kirchner in 2007 let
Chavez host an anti-U.S. rally at a Buenos Aires stadium.

Chavez’s defense of international pariahs such as former
Libyan leader Muammar Qaddafi and Zimbabwe’s Robert Mugabe has
drawn ridicule by Capriles.

“Didn’t we give Bolivar’s sword to Qaddafi two times?”
Capriles said at a press conference Oct. 1, referring to Latin
American liberator Simon Bolivar. “Who’s going to want to
invest in our country? We want relations with countries we have
an affinity with.”

‘It’s Dark at Home’

If elected, Capriles has vowed to review all of Venezuela’s
international agreements, saying the country shouldn’t be
“giving away” its oil resources. Chavez’s foreign projects are
undermining development in Venezuela, he said at his final
campaign rally yesterday.

“What has 21st century socialism done for you,” Capriles
said to supporters. “He’s given your resources to other
countries. Electric plants in Nicaragua, tractors in Honduras,
ambulances in Bolivia. He’s turned the lights on abroad while
it’s dark at home.”

Still, Capriles said in an Oct. 3 interview on Venevision
that he’d maintain relations with countries such as Cuba and
China.

Boosted by election-year spending, Venezuela’s economy will
expand 5 percent in 2012, according to the median estimate of
analysts polled by Bloomberg. The country’s 18 percent inflation
rate is the highest among 102 economies tracked by Bloomberg
after Belarus, Iran and Argentina. It has the highest borrowing
costs among major emerging markets, according to JPMorgan Chase
& Co. indexes.

China Ties

Venezuela’s ties with China, which has lent the government
$42.5 billion, may even improve in a Capriles administration,
said Javier Corrales, co-author of “Dragon in the Tropics: Hugo
Chavez and the Political Economy of Revolution in Venezuela.”

“You’re likely to see more attention to efficiency in oil
production and ultimately the Chinese might welcome that,” said
Corrales, a political science professor at Amherst College in
Massachusetts, in an Oct. 1 interview. “I would be surprised to
see a major issue between them.”

The eight-member bloc of Latin American countries known as
Alba, a political alliance forged by Chavez, risks collapse
without the economic and ideological “backbone” of Venezuela,
according to Corrales. Members, including Ecuador, Bolivia and
Dominica, created the sucre, a virtual currency that is used in
some trade between the countries. The bloc was later eclipsed by
the creation of the Union of South American Nations, backed by
former Brazilian President Luiz Inacio Lula da Silva.

In Decline

“The Alba alliance with Chavez as the leader has already
seen a significant decline,” Arnson said. “If Chavez won
again, his declining health and a lack of clear successor means
that it’s even more weakened as a political force in the
region.”

Ecuadorean President Rafael Correa, one of Alba’s founding
members, said Oct. 2 at a summit in Lima that he would maintain
“excellent” relations with Venezuela even if Capriles were
elected.

Regardless of the result, Chavez has changed the region’s
political dynamic by championing an alternative to U.S. power
and economic policies, said Miguel Tinker Salas, a professor of
Latin American history at Pomona College in Claremont,
California, and author of “The Enduring Legacy: Oil, Culture
and Citizenship in Venezuela.”

“He blazed the trail,” Tinker Salas said in an Oct. 2
interview. “He’s transformed the way that Latin America was
viewed.”